Beyond Twitter: The next wave of tech IPOs brews

Although Twitter filed its IPO paperwork in July, the information wasn’t unsealed until Oct. 3 — just five weeks before its stock market debut. In contrast, Facebook’s IPO filing was accessible — and picked over — for more than four months before the company’s stock market debut.

The confidentiality provided by the JOBS act means some promising startups may have already started the process to go public, but haven’t yet revealed their plans.

By keeping its finances under wraps, Twitter minimized the amount of time people had to dissect the mounting losses the company is absorbing as it expands its service to accommodate 232 million global users. Investors’ willingness to embrace a company that has lost nearly $500 million since its 2006 inception is likely to embolden other unprofitable startups.

As privately held companies, startups rarely reveal anything about their finances until their IPO filings. But some, such as Snapchat and Pinterest, are generating little or no revenue as they subsist on venture capital. Many of the companies that are producing revenue rely on advertising, a dependence that worries Larry Chiagouris, marketing professor Pace University’s Lubin School of Business in New York.

“If you fast-forward beyond the next 24 months, people will realize that these companies just aren’t going to make a lot of money,” he says. “Advertisers are not putting a large portion of their budgets into these companies.”

Chiagouris thinks the stampede to invest in Twitter and other money-losing startups is heading in the same direction as the dot-com bubble of the late 1990s when a horde of unprofitable Internet companies were ushered on to Wall Street.

“People are chasing the dream of profits as opposed to any evidence of profits,” Chiagouris says. “And it’s a hope, it’s a wish, it’s a dream, but that’s all it is right now.”